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In its judgments of May 23 and May 27, 2019, the Spanish Supreme Court (SC) upheld exclusively fining a parent company for breaches committed by an affiliate where the parent company can be presumed to exercise a decisive influence over the affiliate.

Applying this criterion, the SC has overturned Court of Appeals judgments dated December 22, 2017 and July 28, 2017 invalidating two decisions by the Spanish Markets and Competition Commission (CNMC). In both its decisions, the CNMC had directly fined Repsol S.A. (“Repsol”), the parent company of the Repsol Group, for anticompetitive practices committed by its affiliate Repsol Comercial de Productos Petrolíferos S.A. (“Repsol Comercial”).

In its first decision from February 2015 (S/474/13 PRECIOS COMBUSTIBLES AUTOMOCIÓN [Automobile Fuel Prices]), the CNMC fined Repsol and another four fuel companies a total of €32.4 million for collusion arrangements consisting of price fixing, non-aggression pacts, and strategic information exchange by service stations. In its second decision from July 2015 (S/484/13 REDES ABANDERADAS [Flagship Networks]), the CNMC fined Repsol and other service stations a total of €22.8 million for coordinating retail prices, exchanging strategic information, and concluding discount agreements.

Repsol appealed both decisions to the Court of Appeals under the special protection of fundamental rights procedure. In the court proceedings, the dispute basically centered on the interpretation of article 61.2 of the Spanish Unfair Competition Act, which provides for joint and several liability of parent companies for infringements by their affiliates, unless the affiliate’s economic conduct was not decided by the parent company.

The Court of Appeals accepted Repsol’s appeals, holding that the CNMC had wrongly fined Repsol as the perpetrator for certain practices carried out by its affiliate, Repsol Comercial. The Court of Appeals ruled that, in this case, liability could not be attributed directly to the parent company, only joint and several liability because it was considered to bear responsibility for the affiliate. Therefore, the fines imposed on Repsol were canceled.

However, the SC interpreted article 61.2 of the Unfair Competition Act in light of the principles of culpability and personality under articles 24 and 25 of the Spanish Constitution and ruled that fines for infringements committed by an affiliate may be levied against a parent company alone where the parent company has a “decisive influence” on the affiliate’s economic conduct.

The SC ruled that the presumption of decisive influence in article 61 of the Unfair Competition Act did apply in this case, given that (i) Repsol held nearly 100% of Repsol Comercial’s equity capital, and (ii) the parent company bore the burden of refuting the presumption by proving that the affiliate had acted independently in committing the infringement.

Accordingly, the SC distinguished between two types of liability: one for the entity that committed the infringement (article 61.1 Unfair Competition Act) and another one applicable to business groups where the parent company is liable for infringements committed by an affiliate that is under its control, where the former exercises decisive control over the latter (article 61.2 Unfair Competition Act).

As the SC’s judgments have been issued in the context of the special protection of fundamental rights procedure, the underlying issues as they relate to CNMC decisions will be decided in appeals lodged in ordinary proceedings with the judicial review courts.

The SC’s judgment on the decision in case S/474/13 PRECIOS COMBUSTIBLES AUTOMOCIÓN [Automobile Fuel Prices] is available here. The SC’s judgment on the decision in case S/484/13 REDES ABANDERADAS [Flagship Networks] is available here.

This post is also available in: Español



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